Saving for the future

[RedBaron]

I’m a fairly young engineer (almost 25 years old) and I’m trying to figure out how to save for the future besides throwing money into a low interest bank account. I don’t really have any experience in investing – although I was dabbling in fiber optic stocks last month and got burned (thx aaoi). I talked to a financial planner and he was really trying to push his life insurance products on me – that made me a little nervous. Does anyone have any thoughts about taking 1k/month (I can save a little over 2k a month, while still being comfortable) and putting it into a 500 index fund (like a vanguard fund – VFINX)? In a 10 year span, this particular one has averaged ~7%. If I got 5%, I’d be looking at a nice chunk of change in 5-10 years. I’m already maxing out my 401K at work and it is set to a fairly aggressive portfolio. Should I talk to a different FP? Any advice or thoughts would be appreciated. Thanks.

[rwest]

No expert by any means and getting into investing late in the game, so I can say that by starting young you are taking advantage of compounding your money over many, many years.

I have been told by several folks that I know who have done well is that they did best by investing in mutual funds rather than trying to pick individual stocks.

Do you have any kind of 401K matching at work? That would be a good start as you get your money doubled or whatever right away.

Enjoy your early retirement- you're setting yourself up well!

[rwest]

My apologies, I just saw you are already maxing your 401 at work.

Another good thing is to diversify, maybe some real estate?

[fanaudical]

I recommend finding a financial planner that is strictly fee-based (not commission) and work through a couple scenarios with him. What I've done (and is working for me) is invest in a variety of mutual funds and diversified stocks. I'm careful to watch for indications of things going south and act accordingly.

Of course, you're going to get a lot of opinions here (and the full range, too - everything from "invest in XXX" to "get out of the market before the great collapse"). All I can say is research and go find "truth" for yourself. There are no problems with amassing cash while you make a decision...

[Scott Watkins]

Good starting point to begin to educate yourself.

https://www.bogleheads.org/wiki/Getting_started

[KNS]

Smart man. I started investing in Mutual Funds in my mid twenties for a future down payment on a house and retirement. By the time I was 32 I had a fat amount for a down payment and bought my first house.

You're way ahead of most folks your age for even considering your financial future.

[pwd72s]

Originally Posted by RedBaron

I’m a fairly young engineer (almost 25 years old) and I’m trying to figure out how to save for the future besides throwing money into a low interest bank account. I don’t really have any experience in investing – although I was dabbling in fiber optic stocks last month and got burned (thx aaoi). I talked to a financial planner and he was really trying to push his life insurance products on me – that made me a little nervous. Does anyone have any thoughts about taking 1k/month (I can save a little over 2k a month, while still being comfortable) and putting it into a 500 index fund (like a vanguard fund – VFINX)? In a 10 year span, this particular one has averaged ~7%. If I got 5%, I’d be looking at a nice chunk of change in 5-10 years. I’m already maxing out my 401K at work and it is set to a fairly aggressive portfolio. Should I talk to a different FP? Any advice or thoughts would be appreciated. Thanks.

BUY THIS BOOK! How I wish Cindy & I had read this before we made our first investment.

The Bogleheads' guide to investing
by Taylor Larimore/Mel Lindauer/Michael LeBoeuf

It is chock full of investing knowledge. Explaining terms & investing tools in a language anyone can easily understand. Before you give anyone money, understand what you are getting into.

Vanguard is a great fund family.

I congratulate you for starting so young! This gives you time to ride out any sudden downturns.

(edit) This forum isn't the best for investing info. Some here are savvy, some not so much. To participate with those who do put their money where their mouths are, you might want to sign up here:

https://www.bogleheads.org/forum/index.php

[Evans, Marv]

I'll second the comment about getting into & paying off a house at as young of an age as you can. Being free of putting out a decent chunk of your income toward a mortgage gives you a huge sense of security and freedom. I'd do the best you can to divide up that and putting as much savings away as you can. As far as I'm concerned, I'd avoid financial planners and go straight for establishing a Roth (or a combination if you actually can exceed the limits) account paying into a low fee mutual fund. Vanguard low fee funds are a good place to start. Also Paul's suggestion on doing some educational reading is a big help.

[masraum]

Read this The Ultimate Buy and Hold Strategy 2017 - Paul Merriman | Paul Merriman

This is done by the numbers and is about minimizing risk and maximizing return and is fairly in line with Bogle, I believe. The guy used to manage investing for a living and is now retired. He is all about educating people now. He is all about passive index funds and diversification. He backs it up with lots of numbers. It makes a lot of sense.

the idea comes down to this to maximize diversity and minimize risk, 50/50 on foreign and domestic, 50/50 on large cap and small cap, 50/50 on growth and value. He has a couple of different recommendations depending upon if it's a tax deferred account or a taxable account (adding REITs or not).

[wildthing]

Www.fool.com

No affiliation.

A good low cost S&P index is a good starting point, although think about it, your 401K may already heavily invested in such. You may choose to go individual stocks. You have time on your side. (Unless you need it in 5 years, in which case, stocks are not the best for this. Stocks should be held for like 10 to 20 years. Even longer.)

[wdfifteen]

Probably can't do better than an index fund in your situation. It's simple and safe in the long term. Buy and hold, watch and learn. In a few years you will have a solid foundation and be ready to diversify into real estate or other more complicated investments and you will have had time to study and understand them.
Stay away from life insurance products. Only get into them under the advice of a trusted accountant who knows your situation well or a fee-only financial advisor (an advisor who doesn't make their coin by selling you financial products).

[Bill Douglas]

Property is a good thing to get into. You won't get rich quickly but as a very long time investment it's great.

[fred cook]

Since you are already doing the 401K thing, etc, you might want to think about getting some commercial rental property. I say commercial because commercial tenants tend to take good care of their business locations thus minimizing repair costs. Look for property in/on a busy road or area. An older building can work if it has been maintained over the years. With a good location and reasonable rent structures, you can keep tenants for many years. Then, when you get ready to sell, the value of the property should have increased several times. You get the good payday when you sell. I did this for about 35 years and had a good second income stream with little effort on my part. I paid $75K for my property, had an income stream of about $25k per year which easily made the building payments and maintenance costs and still left about $10-12k per year income. When I sold the property, it was long paid for and brought about 5 times the original cost! The only downside was having to pay capital gains taxes! Happy investing!

[Seahawk]

I never, ever give anyone investment advice other than what I have told my children:

Develop a sense of what you are willing to lose. Investing is a risk/reward proposition. Figure that out first. The books and advice so far has been excellent. The key is how much time and effort do you want to spend on the various types of investing (mutual, individual stocks, property, etc.) venues available?

Then speak with at least three FPs. Explain to them you tolerance for risk. Based on their responses, begin to do some homework. Your risk tolerance may change but if you are not an "all in" type of person, don't be. I am a conservative investor and it has served my very well.

Friends of mine have been much more aggressive and have done very well, much better than I have. But I have never lost a minute of sleep worrying (about the the way things might have been).

Investing is for the rest of your life, don't trust anyone with your future. Investing, especially today, isn't rocket surgery.

Give it some time. Follow the basic, first rule: Get a household budget. Informative link here: http://www.leavedebtbehind.com/frugal-living/budgeting/10-recommended-category-percentages-for-your-family-budget/

Be realistic. There is nothing worse than an unhappy spendthrift. If you want to spend more and save less because it makes you happy in your 20's, do it. Understand the consequences.

Then for the love of all that is financial, stick with it! Adjust, certainly, but stay within the tried and true basics.

Once you are better informed, go back to the three FPs and ask them, based on your risk tolerance and house hold budget, to chart a five year path. The next decision is yours.

Kudos for starting early. My children both did as well.

One last thing. Do a budget review, deep dive on the investments quarterly. My wife and I use our tax returns, which we do ourselves, as the final review and yearly planning point.

[drcoastline]

You're already doing some good work. Never hurts to speak to several FP's. A lot of good advice posted already. I agree with Marv about diversifying. There is no magic bullet.

The only thing I would deviate from is the "buy a house". Buy an income property, 2, 3, 4 units, live in one for a few years. There is plenty of time to buy a house and raise a family. Let the tenants money work for you and build equity. Add to the payments and pay it down as quickly as you can. Plus you get the investment write offs. When you do buy a house the unit you lived in becomes another source of income and the rent now pays the mortgage for your house.

I would also look into buying municipal tax liens. You can earn as much as 18% little risk very secure.

[tabs]

The mindset as exhibited here ^^^ is all predicated upon past experiences with no conceptualization of what the future dynamic might be.

There is one major dynamic that is at work today which HAS NEVER TAKEN PLACE in the history of the USA before. The FED is MONETIZING DEBT, they have printed money to fund the US government. What is insidious about it is that the currency they are monetizing is the Worlds Reserve currency. Equate it to the FED and other Central banks pulling the rug out from under you. The historical outcome for such practices has never been pretty. It is destabilizing to say the least.

The other factor that has to be considered is that the US government is running a 680B and CLIMBING yearly Bar Tab....without regard as to how the bill is going to be paid. If there was a political will to balance the budget TODAY that engines momentum could not be stopped until at least 2025.

The upshot of these two factors is that the (Global) system is becoming evermore destabilized and fraught with risk. Both Equities and RE markets performance bears no relationship to economic realities. Both of these markets are distortions brought about as a result of Federal Reserve manipulations of currency and interest rates. This is in the face of political dysfunction in the USA and elsewhere. There is simply no political will nor civil will to face reality. Peoples expectations are out of sync with reality. However slowly it might be, that reality is slowly taking shape by becoming normative. The instability in society that people are experiencing today would have been unheard of a decade ago.

In a conversation with a relative this week our Depression/Greatest Generation parents were discussed with relationship to how they were brought up. For them the normative was DOING WITHOUT. They simply did not have the means nor where with all to have anything. It was a hard scrabble existence. For them having money meant having the security to be able to buy food and provide a roof over their heads. When they had the opportunity after WW2 to work they saved their money. Which is unlike the succeeding generations where Money is something that you go out and BUY SOMETHING with. This later mindset is the hubris that comes with the prosperity of flush economic times. For what does it matter the barrel of prosperity is endless. If you do not have cash, no matter there is credit. Which is in fact an obligation upon FUTURE earnings...the money has been spent before you even get it. This then constricts future spending and ultimately the DEMAND CURVE. This is essentially why economies remain evermore sluggish and moribund. As debt rises economies become evermore sluggish...that is why Humpty Dumpty CAN NOT BE PUT BACK TOGETHER AGAIN>..

Americans have traded in their future for some cheap plastic crap made in China. One hopes you are all happy campers.

[jcommin]

look up time value of money" - you need to put money away for retirement and crate a nest egg. you might need to fund you own medical costs. Take advantage of time - pay yourself first. As you grow older and life gets in the way, you will need to save for college as well. if you have the discipline - you will be alright.


just remember, life gets in the way - what you think you have - what you earmarked for one thing, goes on something else. However, if you saved, you will will have it.

good luck!

[tabs]

FACT OF LIFE...REALITY IS:

Economic STASIS and STAGNATION was bought after 2008 at the price of:

1. Monetizing Debt

2. The DOUBLING of FEDERAL DEBT.

There has been NO ECONOMIC recovery to speak of, especially when considering that what economic growth has occurred mirrors population increase. Then one has to consider that all that new money has to go somewhere? Equities and a RE recovery...(the FED bought nearly a trillion in mortgage backed securities). The alternative to FED action was rather bleak, and as stated better the devil you know than the one you don't.

Distortions in markets and economies eventually correct themselves. The greater the distortion the greater the stresses upon the system as the system tries to maintain an equilibrium. Eventually reality wins out and systems correct to regain equilibrium. Also the greater the distortion the quicker the snap back to equilibrium can occur. Equate it to the falling of a house of cards. War in this instance becomes a distinct possibility as well as a break in in the dam of confidence in the FED. As for the loss of confidence there are the seven phases of acceptance.

Trump becomes the HOPE of the outsider figure that can right the problems that the insiders are unable to correct. It was more or less preordained that he would fail. The dynamics of which have been enumerated previously.

REALITY CAN NOT BE DENIED.

Reality is that the Great post WW2 ERA of economic prosperity and plenty is over and the USA in particular is in a reversion to the mean of human history. Which is hallmarked by a small number of the very wealthy, a smallish MC and a large working poor class. Unfortunately the Great Enlightenment is over as human natures propensity for barbarity and intolerance (of other peoples views) takes precedence in time of stress. . Liberalism has the requisite blind adherence to an ideology that drowns out rationality. As many are now finding Liberalism is the new face of FASCISM with their growing hysterical intolerance. .

[recycled sixtie]

Originally Posted by tabs

FACT OF LIFE...REALITY IS:

Economic STASIS and STAGNATION was bought after 2008 at the price of:

1. Monetizing Debt

2. The DOUBLING of FEDERAL DEBT.

There has been NO ECONOMIC recovery to speak of, especially when considering that what economic growth has occurred mirrors population increase. Then one has to consider that all that new money has to go somewhere? Equities and a RE recovery...(the FED bought nearly a trillion in mortgage backed securities). The alternative to FED action was rather bleak, and as stated better the devil you know than the one you don't.

Distortions in markets and economies eventually correct themselves. The greater the distortion the greater the stresses upon the system as the system tries to maintain an equilibrium. Eventually reality wins out and systems correct to regain equilibrium. Also the greater the distortion the quicker the snap back to equilibrium can occur. Equate it to the falling of a house of cards. War in this instance becomes a distinct possibility as well as a break in in the dam of confidence in the FED. As for the loss of confidence there are the seven phases of acceptance.

Trump becomes the HOPE of the outsider figure that can right the problems that the insiders are unable to correct. It was more or less preordained that he would fail. The dynamics of which have been enumerated previously.

REALITY CAN NOT BE DENIED.

Reality is that the Great post WW2 ERA of economic prosperity and plenty is over and the USA in particular is in a reversion to the mean of human history. Which is hallmarked by a small number of the very wealthy, a smallish MC and a large working poor class. Unfortunately the Great Enlightenment is over as human natures propensity for barbarity and intolerance (of other peoples views) takes precedence in time of stress. . Liberalism has the requisite blind adherence to an ideology that drowns out rationality. As many are now finding Liberalism is the new face of FASCISM with their growing hysterical intolerance. .

The OP asked for opinions on how to invest but did not ask for an economic forecast.
Try and put your feet in his shoes and establish what you would do if you were him.
Where does he put his money?

[sc_rufctr]

Originally Posted by Bill Douglas

Property is a good thing to get into. You won't get rich quickly but as a very long time investment it's great.

"As safe as houses"